In Henderson Acquisitions Ltd v HMRC [2023] TC08922, HMRC's argument that for SDLT purposes a property that was a dwelling will continue to be a dwelling unless it is so uninhabitable that it requires demolition allowed the FTT took a more nuanced view. It nevertheless ruled a run-down property retained its character as a dwelling.

  • The Appellant paid Stamp Duty Land Tax (SDLT) on the basis that its Property was taxable at the Residential rate and as it was a company, the higher rates of SDLT applied.
  • Following the purchase of floor joists that collapsed due to a water leak, a building contractor who examined the electricals in the property pronounced them as dangerous having been “subject to multiple DIY alternations … [using] incorrect cable sizes and types, termination points in inaccessible locations and numerous potential fire hazards from incompetent workmanship”.
  • In time, a Stamp Duty saving specialist came calling and advised that due to the nature and extent of the renovation works the Property was not “Suitable for use as a dwelling” and did not meet the definition of a residential property.
  • On the advice that SDLT should have been payable at the lower rate applicable to non-residential buildings, a refund claim was submitted on behalf of the Appellant.
  • The specialist's surveyor (who did not actually visit the property) suggested that roof leaks resulting in damage to internal plasterwork, missing/defective plasterwork, partial rebuilding of internal brickwork walls (and use of Acrow props), a defective heating system, defective electrics and consequential works all meant that the Property was not suitable for use as a dwelling.
  • In addition, it was claimed that "the property had health and safety concerns which could have presented a danger to any occupant residing within.”
  • HMRC rejected the amendment denying that the building was not residential.

The appellant appealed to the First Tier Tribunal (FTT).

  • Before the FTT, HMRC argued that a property that was a dwelling would continue to be a dwelling unless it was so uninhabitable that it required demolition.
  • The FTT reviewed the evidence and found that the property had been actually used as a dwelling by the former owner albeit with dangerously defective wiring and aged central heating system.
  • It too disagreed with the claim, noting from the details of previous case decisions on this topic that the level of disrepair was not sufficient to render the dwelling unsuitable for use as such.

The taxpayer's appeal was dismissed.

Editorial comment

A peculiar claim was made; the Stamp Duty savings specialist made a complaint against HMRC because it considered that "HMRC were not in a position to challenge the view of a surveyor as to the Property’s suitability for use as a dwelling". This led the FTT judge to comment that, "Plainly, the surveyor is capable of forming a view (though as noted above this surveyor did not actually visit the property) but whether for tax purposes the building is suitable for use as a dwelling in the context of FA03 is not a question the surveyor is qualified to opine upon. His/her/their view on the state of the Property is a relevant factor to be taken into account but will not be determinative"

Useful guides on this topic

SDLT: Residential property & dwellings
What is residential property for Stamp Duty Land Tax (SDLT)? What tax rate applies? What garden and grounds are subject to higher rates of SDLT?

SDLT: Residential property higher rates
What Stamp Duty Land Tax (SDLT) rate applies for the purchase of a second home? What is the SDLT higher rate? Are there any reliefs from the SDLT higher rate?

SDLT: Multiple Dwellings Relief
What is multiple dwellings relief? When does it apply and how is it claimed?

SDLT: Linked transactions
What are linked transactions? When do the linked transaction rules apply for SDLT? How do I calculate SDLT on a linked transaction?

External links

Henderson Acquisitions Ltd v HMRC [2023] TC08922 

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